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US Dollar Index Should Settle Into a Trading Range, Test 200-Day Moving Average


The euro has broken above the 1.25 resistance level, and we'll see if it can hold next week.

MINYANVILLE ORIGINAL The US Dollar Index has decisively broken key short term support levels, and I would expect it to settle into a trading range for the next week or so, until everyone gets back from "vacation" next week. The 82.5 level will probably act as short term overhead resistance, and the 200 day moving average will provide some support down at 80.5, so keep an eye on those levels this week. Longer term, I still think the uptrend in the US Dollar Index will resume, but the market is clearly telling us that the DX needs to consolidate for a while longer before it can gain power for another move higher. Time to be patient and let the market tells us which way to go. See the chart below.

Click to enlarge

The euro has been able to recapture the 1.25 level, and it looks like it might continue higher into the 200-day moving average just above 1.28. It will be interesting to see if the euro can hold above 1.25 next month, and it will probably be a volatile September as everyone gets back from summer and begins to position portfolios for the end of the third quarter. Longer term, I still think the euro could trade back to parity with the USD, but it looks like the market is buying the euro some time!

Click to enlarge

Obviously, my calls have not been in synch with the market these past few weeks, so I will hold off on looking at any other currencies at the moment. Like I said, I think next week and the month of September as a whole will be interesting as trading desks get back to being fully staffed, and investors prepare to position portfolios for the end of the third quarter. This seems like one of those times to be patient and keep powder dry, so that we can wait for better risk reward setups and get some swings at fat pitches! I hope everyone has a safe and fun Labor Day weekend -- it is hard to believe summer is over!
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Position in EUO.
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